Low-cost carrier SpiceJet’s fortunes seem to have taken a turn for the better with the airline operating almost all planned flights on Thursday and talk of an investor coming in growing louder. Aviation ministry officials said that Ajay Singh, a former promoter, would invest in the cash-strapped airline along with overseas investors. On Wednesday, it had appeared the carrier would be grounded after it failed to access fuel from oil marketing companies (OMCs) and was forced to cancel most flights.
Sources said the troubled airline has almost fully cleared R14 crore worth of dues to OMCs and that it is expected to furnish a bank guarantee worth R120 crore to the Airports Authority of India (AAI) to cover previous liabilities of R200 crore. The firm has already given a guarantee for R80 crore.
Airline officials said operations on Thursday were restored to near normal with 230 flights taking off, albeit with some delays. Company executives were confident operations would be smooth, saying the airline had attracted some investment. Singh, sources said, was likely to be able to rope in overseas investors. “In fact, the oil dues have also been cleared, which is a big reason why operations were smooth today,” a top executive said.
An alumnus of IIT Delhi and Cornell, Singh, along with UK-based Bhupendra Kansagra, started SpiceJet in 2005 when he resurrected the air operators permit of ModiLuft that had ceased operations in 1996. He later sold the airline to the current promoter, the Sun Group’s Kalanithi Maran in 2010.
Meanwhile, Union minister for civil aviation P Ashok Gajapathi Raju said SpiceJet had made a representation that was being looked into. “We are making up our minds on what we can do to help because we do not want the airline to go down. They are talking about an investment around the corner and there is certainly an improvement today,” he said. The SpiceJet scrip closed 0.38% up on the BSE to end Thursday’s session at R13.20.
Company sources told FE the airline was currently making close to R1 crore a day from forward bookings after the government on Tuesday lifted a ban on bookings beyond 30 days and allowed it to offer tickets till March 31.
Generating cash flow through tickets sales is critical since the airline’s daily fuel bill itself is about Rs 5 crore. However, analysts say it could be a while before passengers regain confidence in the airline.
While on Monday the civil aviation ministry had attempted to help, directing AAI to give the airline credit for 15 days and requesting OMCs like Bharat Petroleum and Indian Oil Corporation to also offer credit, SpiceJet failed to access fuel from the OMCs. The ministry is also understood to have requested banks to loan the company Rs 600 crore, on the back of a personal guarantee from Maran, but banks were not forthcoming.
With even aircraft lessors at the door asking for payments, SpiceJet needs to clear dues worth Rs 1,400 crore immediately to stay afloat, official sources said. Total liabilities stand at around Rs 2,000 crore. The airline, which posted a record loss of Rs 1,003 crore in 2013-14 and has run up accumulated losses of Rs 2,958 crore, has a negative net worth of Rs 1,459 crore. Its share in the domestic passenger market share fell to 14.9% in November, the lowest point for the year so far.